In an effort to ensure you are always in compliance with government rules and regulations, we wanted to take a few minutes to remind businesses to file the necessary Forms 1099 for the 2017 calendar year. The IRS recently announced a crackdown on compliance with these forms and penalties can be severe.

KNOWING WHEN TO COMPLETE A FORM 1099

Every individual or non-corporate entity to which your business has paid $600 or more for services or rents during 2017 must be issued a Form 1099-MISC, except if the service provider is a corporation. (You are responsible for determining if the business is incorporated.) Please note, payments to lawyers are part of the filing requirement regardless of whether the firm is incorporated.

COMPLETING A FORM 1099

Properly completed Form 1099’s must show the payor and payee’s mailing address and Federal ID numbers (or social security numbers). Service providers must give you this information, which is typically done through a W-9 Form. If they do not provide this information after you’ve requested it in writing, you are “required to withhold 28% federal tax and pay it to the IRS on Form 945.” Forms 1099-MISC with an amount in Box 7 must be mailed to both the vendor and IRS by January 31, 2018, regardless of whether they are being filed electronically or via paper. All other Form 1099-MISC must be mailed to vendors by January 31, 2018, but you have until February 28, 2018 to mail them to the IRS if they are paper-filed or until March 31, 2018 if they are being filed electronically.

FAILURE TO PROPERLY ADHERE TO FORM 1099 GUIDELINES

The following is a chart (provided by www.irs.gov) of the penalties for non-compliance to the new rules:

Small Businesses with Gross Receipts $5 Million or Less  

(Average annual gross receipts for the most recent 3 taxable years) IRC 6721 & IRC 6722

Time returns filed/furnished Due 01-01-18 thru 12-31-2018
(inflation adjusted)
Not more than 30 days late
(by March 30 if the due date is February 28)
$50 per return/
$187,500 maximum
31 days late -August 1 $100 per return/
$536,000 maximum
After August 1 or Not at All $260 per return/
$1,072,500 maximum
Intentional Disregard $530 per return/
No limitation

 

 

 

 

 

 

 

Large Businesses with Gross Receipts of More Than $5 Million and Government Entities  

(Average annual gross receipts for the most recent 3 taxable years) IRC 6721 & IRC 6722

Time returns filed/furnished Due 01-01-18 thru 12-31-2018
(inflation adjusted)
Not more than 30 days late
(by March 30 if the due date is February 28)
$50 per return/
$536,000 maximum
31 days late – August 1 $100 per return/
$1,609,000 maximum
After August 1 or Not At All $260 per return/
$3,218,500 maximum
Intentional Disregard $530 per return/
No limitation

 

Penalties for not filing correct information returns (Code Section 6721) may apply if you:

  • Don’t file a correct information return by the due date and a reasonable cause is not shown;
  • File on paper when you were required to file electronically;
  • Don’t report a Taxpayer Identification Number (TIN);
  • Report an incorrect TIN; or
  • Don’t file paper forms that are machine readable.

Penalties for not providing correct payee statements (Code Section 6722) may apply if:

  • You don’t provide a correct payee statement by the applicable date and a reasonable cause isn’t shown;
  • All required information isn’t shown on the statement; or
  • Incorrect information is included on the statement.

If you need assistance on filing Form 1099’s or if you would like to verify whether you need to file them, please reach out to your Blackman & Sloop tax advisor.

For more information on penalties, information returns and payee statements, see General Instructions for Certain Information Returns (PDF) and General Instructions for Forms W-2 and W-3 (PDF).